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Prisons, Colleges, and the Private-Sector Delusion

Republicans have been touting the inherent superiority of the private sector over the public at least since the Reagan era, but in the past few years it seems to have congealed into an unassailable mantra: the free market as the ultimate guarantor of good services, low costs, and a free and happy citizenry. Mitt Romney is definitely on board. Campaigning this winter, he praised the efficiency of for-profit colleges that he said ?hold down the costs of education,? and went on to say, ?I just like the fact that there?s competition. I like the fact that institutions of higher learning will compete with one another, whether they?re for-profit or not-for-profit.?

Romney?s education plan calls for putting commercial banks back in charge of federal student loans. (The Obama Administration had stopped that practice in 2010, saying it was too expensive for the federal government.) He has floated the idea of partially privatizing both veterans? health care and Medicare through a voucher system. We?ve heard more from him about his experience at the private-equity firm Bain Capital than about his tenure as governor of Massachusetts, and he presents his business experience as self-evidently worthwhile: ?The fact is I spent 25 years in the private sector, and that obviously teaches you something that you don?t learn if you haven?t spent time in the private sector,? Romney told Time magazine, in a typical declaration.

I thought about the free-market shibboleth this week as I read two excellent pieces of journalism about the injection of the profit motive into education and incarceration. One was Andrew Leonard?s article at Salon about a company called Corinthian Colleges, and the other was Cindy Chang?s eight-part series in the New Orleans Times-Picayune about the prison industry in Louisiana.

Leonard?s piece is not the first to look in detail at the dubious business of for-profit colleges. After Romney talked them up in December, the New York Times ran a long article highlighting the low graduation rates and high tuitions at many for-profit colleges and reported that the C.E.O. of the college Romney had singled out for particular praise, Full Sail, in Florida, was a major donor to his campaign. A 2011 study from the National Bureau of Economic Research found that students who attended for-profit colleges had more of a debt burden, were more likely to default on their loans, and were less likely to be employed than students who?d gone to nonprofit institutions.

In 2010, the Obama Administration announced that it would be seeking new regulations on the for-profit college industry. But the industry fought back, hard. According to the Web site OpenSecrets, which tracks lobbying efforts, for-profit colleges went from spending $2.7 million on lobbying in 2009 to nearly $7.4 million in 2010 and $12.5 million in 2011. Prominent Democrats, including Obama?s former communications director, Anita Dunn, who was working with Kaplan University, and the former House Majority Leader Richard Gephardt, joined the lobbying effort; so did investors such as Donald Graham, the chief executive of the Washington Post, which owns Kaplan. According to the Times, the result of this full-court press was ?a much-weakened final plan? for regulating the industry ?that will almost certainly have far less impact as it goes into effect next year.?

That?s where an article like Leonard?s comes in. He?s been covering this issue for a while, doesn?t seem inclined to let it go, and shouldn?t. Leonard invokes the ?numerous lawsuits? against a company called Corinthian Colleges, including one in which a former admissions officer described high-pressure, even bullying recruitment tactics at one of the company?s schools, Everest: ?The ultimate goal was to essentially make [potential students] wallow in their grief,? the admission officer?s affidavit says,

feel that pain of having accomplished nothing in life, and then use that pain as their ?reasons? to compel the leads to schedule an in-person meeting with an Everest admissions representative.

A spokesman for Corinthian denied this account of its recruiting, but, as Leonard writes, ?there?s little question that an obsessive focus on constantly boosting enrollment is crucial to survival in the for-profit college world. Sky-high withdrawal rates plague the industry.?

Moreover, Corinthian, like other for-profits, depends on students taking out federal loans to pay their pricey tuitions, and the default rate on those loans is unusually high. In 2012, California enacted a new law excluding colleges from a state financial aid program if their student-loan default rate over three years was more than 24.6%. ?Of the state?s 167 for-profit schools, 67 failed the test?. None of California?s public schools failed.?

Chang?s series in the Times-Picayune, meanwhile, took a close look at how it is that Louisiana nearly doubled its prison population in the past twenty years, to become the state with the highest per-capita incarceration rate in the country?the highest in the world, in fact. (Adam Gopnik has written for The New Yorker about our mass-incarceration culture.)

What Chang finds is a system under which the state began housing the majority of its inmates in for-profit facilities, many of them run by cash-strapped local sheriffs and some by private prison companies. Both have a financial incentive to keep the prisons full? like hotels, prisons in Louisiana don?t want any vacancies. ?If the inmate count drops, sheriffs bleed money,? writes Chang. ?Their constituents lose jobs. The prison lobby ensures this does not happen by thwarting nearly every reform that could result in fewer people behind bars.? (The Picayune reported this week that Chang survived the massive layoffs at the paper?which, sadly, will also be cutting back to just three days a week in print?but she?ll no longer have the ?special projects? reporter designation that allowed her to do this ambitious investigation.)

Private prisons save money by paying employees less and training them for shorter periods; as a result, turnover is high, assaults more frequent, and safety records generally poorer than in government-run prisons. And because this is incarceration on the cheap?the sheriffs get about twenty-five dollars a day per inmate?there is no money to pay for educational or vocational programs, even though these prisoners tend to be serving time for non-violent, often drug-related offenses, and so will be released into society, where they will have to make their way.

?If you are sentenced to state time in Louisiana,? Chang writes, ?odds are you will be placed in a local prison in a low-budget, for-profit enterprise, where you are likely to languish in your bunk, day after day, year after year bored out of your skull with little chance to learn a trade or otherwise improve yourself. A coveted spot at a state prison like Angola, Hunt or Dixon is a long shot for anyone not convicted of a violent crime such as murder, rape, or armed robbery.? Yes, you read that correctly: coveted spots in state prisons like Angola.

Like the for-profit college industry?but with a longer track record?the for-profit prison industry devotes ample funds to lobbying and to campaign donations. As a result, it has been able to keep alive the notion that it does the job more efficiently than public prisons, even when evidence to the contrary keeps piling up.

But the worst part is that policies a majority of citizens might want?a lower rate of incarceration, perhaps; less draconian drug laws; programs that train inmates for re-entry to society or oblige them to work?are likely to be blocked by a company that has its own, money-making interests to fulfill. As the Corrections Company of America?s 2010 annual report puts it, ?the demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through decriminalization of certain activities that are currently practiced or proscribed by our criminal laws.?

Letting the private companies do public work may or may not be efficient; it depends on the job, and the oversight. What it frequently is not is democratic, or just.

Photograph by Ed Kashi/Corbis.
Keywords

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for-profit colleges;
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WisconsinUnion workers replaced with prisoners working for slave wages

Seen as a great victory by the Wall Street plutocrats and greedy Republican fanatics who adore their precious college dropout Scott Walker, it?s become apparent that prisoners are doing the work that hard-working Union workers had done before. Walker never mentioned that he would bring about slave labor to indulge his Masters while taking away jobs from law-abiding workers trying to support their families.

One can only imagine the pattering clumsiness of his giggles in his limousine as he sees a field of prison laborers toiling for pennies while knowing that those who protested his selfish autocratic policies in the winter winds at the Capitol in Madison are scraping along to feed their children in their homes in modest communities.

While Wisconsin Gov. Scott Walker?s (R) law dismantling collective bargaining rights has harmed teachers, nurses, and other civil servants, it?s helping a different group in Wisconsinites ? inmates. Prisoners are now taking up jobs that used to be held by unionized workers in some parts of the state.

As the Madison Capital Times reports, ?Besides losing their right to negotiate over the percentage of their paycheck that will go toward health care and retirement, unions also lost the ability to claim work as a ?union-only? job, opening the door for private workers and evidently even inmates to step in and take their place.? Inmates are not paid for their work, but may receive time off of their sentences.

The law went into effect last week, and Racine County is already using inmates to do landscaping, painting, and another basic maintenance around the county that was previously done by county workers. The union had successfully sued to stop the country from using prison labor for these jobs last year, but with Walker?s new law, they have no recourse.

There have seen prisoners used at the Capitol in Madison to do landscaping work and other chores and there will be documentation of those events when available. Perhaps that was not reported yet. For those short-sided, clueless cheerleaders who see this as ?great news for Wisconsin taxpayers?, they are forgetting that the law-abiding workers supporting their families who used to do this work for a living wage aren?t buying as much in their communities and are struggling to keep their homes. Perhaps that?s just too complicated for some to figure out.

Last month, a company called Education Management Corporationwas sued by the Department of Justice. Education Management is a for-profit education company; in fact, it is the country?s second-largest such company, with more than 150,000 students attending classes on more than 100 campuses, where it offers degrees in business, accounting and nursing, among other subjects.According to the government, Education Management had a ? ?boiler-room?-style sales culture.? Its recruiters used ?high-pressure sales techniques, and inflated claims about career placement to increase student enrollment, regardless of applicants? qualifications,? as The Times put it in an article about the lawsuit. And it supposedly paid recruiters bonuses based solely on how many students they enrolled ? which is against the law.Although Education Management vehemently denies the charges and vows to fight them, this is hardly the first time a for-profit university has been accused of impropriety. Indeed, during the last half-dozen years or so, scandal has dogged the industry. In recent years, Kaplan, a division of the Washington Post Company, faced allegations that it recruited unqualified students and had an unacceptably high percentage of defaults on its student loans. This summer, it settled a lawsuit (without admitting wrongdoing) that claimed it failed to place students in externships.The allegations all stem from one essential fact: The for-profit college industry makes its money by recruiting students ? overwhelmingly poor and working-class students ? who must draw from the federal till to pay tuition. In many cases, as much as 90 percent of the revenue of a for-profit college company comes from the federal government, in the form of Pell Grants and student loans. The more students the companies enroll, the more federal money they get ? and the more profit they make.This has led to a widespread view that the for-profits will do just about anything to get that federal money. Although for-profit colleges enroll 12 percent of the nation?s college students, they soak up about 25 percent of the federal government?s student-aid budget. Fewer than half the students who enroll in the four-year for-profit schools graduate. Roughly 47 percent of those who were paying back their loans in 2009 defaulted by 2010.The shadow of scandal has, in turn, done a lot to color the way the larger society thinks about the industry. No one is much willing to listen to its defenders, who point out, for instance, that higher default rates are inevitable given the higher-risk populations being served, or that state schools also receive enormous taxpayer subsidies that just don?t happen to be as obvious, or that the allegations hurled at the for-profit schools are sometimes overblown or unfair. Educating the poor and the working class is something that should be encouraged, rather than scorned, they say. Jeffrey Leeds, whose private-equity firm owns a big chunk of Education Management, says, ?Our mission is straightforward, and one we are proud to take on ? to help students, typically nontraditional students, successfully complete college programs with workplace skills that enable them to get good jobs in a tough economy.?Instead, the industry?s transgressions have led many critics to conclude that the only way to ?fix? for-profit education is to get rid of it entirely. One such critic is Steve Eisman, the famous short-seller and hero of Michael Lewis?s book ?The Big Short.? Last year, he said in a speech that the for-profit education industry was ?as socially destructive and morally bankrupt? as the subprime-mortgage industry. Having bet against for-profit education stocks, he then made similar remarks in Congressional testimony. Not surprisingly, this caused more stock declines in the sector.All of this obscures what really ought to be the most important fact about the industry: the country can?t afford to put it out of business. On the contrary, America needs it ? and needs it to succeed ? desperately.To start with the obvious, a college education has never been more necessary for a decent life in America. Many manufacturing jobs now demand a level of skill and education that virtually requires a college degree. A lot of white-collar employers won?t even consider a job applicant who hasn?t graduated from college.And yet for the poor and the working class, that education is not easy to attain. State university systems have become increasingly expensive. Community colleges are terribly overcrowded. The schools most capable of meeting the country?s growing education needs are the for-profits. In the decade beginning in 1998, enrollment in public and private universities went up less than 25 percent. Enrollment in the for-profit colleges, meanwhile, was up 236 percent.What?s more, the traditional university isn?t really set up to educate a person who has a full-time job. The for-profits can offer class times that are convenient for students, rather than for professors. They can offer online classes, which many traditional universities have been reluctant ? or unable ? to dive into. They pay professors to teach, not conduct research. A well-run for-profit college could teach its nonprofit counterparts a thing or two about efficiency and innovation. That?s the part of the profit motive that grades well.The bad part, of course, is that capitalists will always behave more or less like greyhounds chasing a mechanical rabbit, motivated by whatever incentives are put in front of them. Just as the federal government created perverse incentives that helped bring about the subprime crisis, so have the government?s rules for the for-profit industry unwittingly led to its excesses. When industry reaps all the profit from student loans and the taxpayer has to pick up the losses, how can we be surprised when things turn out badly? What is needed now is creative, enlightened policymaking that will change the incentives so that good outcomes matter more than sheer volume.Recently, the Department of Education issued a series of regulations that are supposed to do just that. Unfortunately, the new rules are cumbersome, complicated ? and more than a little punitive. The most controversial of them, known as the gainful employment rule, is built in part on the actual earnings of all the graduates of a given for-profit college. Yet, astonishingly, the schools themselves are never allowed to see the income numbers of individual graduates because the government considers them private. Rules like that aren?t likely to help fix anything.There is an easier way. Robert Silberman, the chairman and chief executive of Strayer Education, widely regarded as one of the better for-profit companies, suggests replacing the plethora of regulations with two simple changes. First, he says, the government should force the for-profits to share in the losses when a student defaults. And second, the government should set up a national eligibility test to screen out students who lack the skills to attend college. Would there still be defaults? Of course. But plenty of students at nonprofit universities default, too. Silberman?s solution would help ensure that both the government and for-profit companies are taking smarter risks on the students they enroll and educate.There is nothing inherently wrong with the idea of for-profit education. The for-profits have flaws, but so do nonprofits, with their bloated infrastructure, sky-high tuition, out-of-control athletic programs and resistance to change. In a country where education matters so much, we need them both.

Also your article criticizes the private sector but then goes on to bash for-profit colleges but that's not the same thing. Most private universities are non-profit and the for-profits probably get more of their income from the federal government than the non-profits(since the larger universities will have many more private scholarships).

That article is ridiculous it points out a few issues then makes a grandiose conclusion.

Also your article criticizes the private sector but then goes on to bash for-profit colleges but that's not the same thing. Most private universities are non-profit and the for-profits probably get more of their income from the federal government than the non-profits(since the larger universities will have many more private scholarships).

That article is ridiculous it points out a few issues then makes a grandiose conclusion.

there are far more private universities than you think below is a list of them, numbering in the thousands. in terms of the big universities in the NCAA, etc. the brackets are based on tuition which is why you see the same schools playing each other all the time, etc.

There is nothing inherently wrong with the idea of for-profit education. The for-profits have flaws, but so do nonprofits, with their bloated infrastructure, sky-high tuition, out-of-control athletic programs and resistance to change. In a country where education matters so much, we need them both.[/COLOR]
[/FONT][/COLOR]

tell that to the students that are saddled with debt that will follow the to the grave. tell that to the graduated students that are working in fields that are paying them 1990's wages once adjusted for inflation. and tell that to the students that can't sell their books that cost hundreds of dollars back to the school because they are constantly changing them specifically to increase revenues.

tell that to the students that are saddled with debt that will follow the to the grave. tell that to the graduated students that are working in fields that are paying them 1990's wages once adjusted for inflation. and tell that to the students that can't sell their books that cost hundreds of dollars back to the school because they are constantly changing them specifically to increase revenues.

The few sentences before what you quoted are the substantive part of the article. These for-profit colleges exists only because up to 90% of of the revenue comes from federal money.

Just as the federal government created perverse incentives that helped bring about the subprime crisis, so have the government's rules for the for-profit industry unwittingly led to its excesses. When industry reaps all the profit from student loans and the taxpayer has to pick up the losses, how can we be surprised when things turn out badly? What is needed now is creative, enlightened policymaking that will change the incentives so that good outcomes matter more than sheer volume.Recently, the Department of Education issued a series of regulations that are supposed to do just that. Unfortunately, the new rules are cumbersome, complicated and more than a little punitive. The most controversial of them, known as the gainful employment rule, is built in part on the actual earnings of all the graduates of a given for-profit college. Yet, astonishingly, the schools themselves are never allowed to see the income numbers of individual graduates because the government considers them private. Rules like that aren?t likely to help fix anything.There is an easier way. Robert Silberman, the chairman and chief executive of Strayer Education, widely regarded as one of the better for-profit companies, suggests replacing the plethora of regulations with two simple changes. First, he says, the government should force the for-profits to share in the losses when a student defaults. And second, the government should set up a national eligibility test to screen out students who lack the skills to attend college. Would there still be defaults? Of course. But plenty of students at nonprofit universities default, too. Silberman?s solution would help ensure that both the government and for-profit companies are taking smarter risks on the students they enroll and educate.There is nothing inherently wrong with the idea of for-profit education.

The few sentences before what you quoted are the substantive part of the article. These for-profit colleges exists only because up to 90% of of the revenue comes from federal money.

of course the private sector requires government subsidy for those loans that's how the markets work. how do you think all of the utilities in the US got built, and privately owned hydroelectric dams, etc. the private sector NEVER USES ALL OF IT'S OWN MONEY, not in US history. when the subsidy stops so does investment by the private sector as this is what all of the historical economic data shows.

with a median household income ( 2 adults working full time) is less than $50K a year or an inflation adjusted $28K in 1990's dollars. the cost of education started to drastically increase in the 80's which again concedes with financial deregulation and the change from the US being a manufacturing based economy to that of consumption. you can continue to blame government all you want but government is nothing but a paid stooge for the markets represented by lobbyists/special interest groups and the revolving door from DC to the high paying private sector.

if it was simply a problem with government you would see this across the other wealthy industrialized country in the OECD but you don't. as usual the US is the on the extreme end.

Obviously there is a conflict of interest with for-profit schools and for -profit prisons. But, the fact is most private colleges and primary schools are set up as non profits and the quality is better than most public schools. I worked for one in China and the focus was on getting as many students enrolled as possible and making sure as many passed as possible. But, most for-profit schools are known to be degree factories and are not acredited. This is really a nonissue.

But, the fact is most private colleges and primary schools are set up as non profits and the quality is better than most public schools.

that is how they used to be, not anymore. most of the big name private colleges and university's are publicly listed on the NYSE. that being the case ever increasing profits are needed to keep stock shares from falling. take Knowledge Universe (KU) as an example of a parent company for the private for profit schools called Kindercare among others. controlled by the same piece of shit junk bond Milken brothers from the S&L crisis in the 80's. they charge premium prices for tuition to their schools and pay their mostly college educated staff $14/hr. good luck paying off those college loans with those poverty wages.

William F. Buckley describes a conservative as, "someone who stands athwart history, yelling Stop." - and then proceeds to drag civilization back to times best left in history's dungheap.

of course the private sector requires government subsidy for those loans that's how the markets work. how do you think all of the utilities in the US got built, and privately owned hydroelectric dams, etc. the private sector NEVER USES ALL OF IT'S OWN MONEY, not in US history. when the subsidy stops so does investment by the private sector as this is what all of the historical economic data shows.

with a median household income ( 2 adults working full time) is less than $50K a year or an inflation adjusted $28K in 1990's dollars. the cost of education started to drastically increase in the 80's which again concedes with financial deregulation and the change from the US being a manufacturing based economy to that of consumption. you can continue to blame government all you want but government is nothing but a paid stooge for the markets represented by lobbyists/special interest groups and the revolving door from DC to the high paying private sector.

if it was simply a problem with government you would see this across the other wealthy industrialized country in the OECD but you don't. as usual the US is the on the extreme end.